Nie and Mitchell are with the Department of Mathematical Sciences, Rensselaer Polytechnic Institute, Troy, NY, 12180, USA.
Afrin, Kar, and Chow are with the Electrical, Computer, and Systems Engineering Department, Rensselaer Polytechnic Institute, Troy, NY, 12180, USA.
July 2026
Abstract: Renewable power generators typically participate as price-takers in current electricity markets, and market clearing prices are determined by cost curves of conventional generators while treating renewable generation as negative load. In this paper, we analyze a new design of electricity markets where renewable power generators bid their risk-adjusted cost curves into the market, just like the cost curves of conventional generators. We establish that on average, the total revenue of both conventional and renewable generators, as well as the total cost to consumers, under the proposed market is the same as that in current practice. However, compared to current practice, the variability in the total consumer cost is always lower in the proposed market, i.e., the risk of price variability due to uncertainty in renewable generation is not borne by the consumers. Further, under certain operating conditions, the proposed market also results in lower variability in the revenue earned by the renewable generators. We then show how these cost curves should be adjusted to incorporate the risk of shortfall into the bidding and unit commitment process through the Conditional Value-at-Risk (CVaR) metric. Using data from the Texas grid, we evaluate the bid curves for renewables and quantify the tradeoff between renewable revenue and cost-to-load. We also study how CVaR-based adjustments for shortfall risk impact allocations and payments at market clearing. While equivalent in terms of average cost and revenue measures, the new market design insulates customers from the price risk associated with the uncertainty of renewable power generation. Further, it allows renewables to be direct participants in the bidding process and bid according to their risk-return tolerance level.